Are you a director of a Residents’ Management Company or Right to Buy Manage Company? If so, are you aware of your statutory obligations to leaseholders?
Improvement/ Repairs:
Make sure you know the terms of the lease before embarking on any major works project. Most leases usually provide that the landlord (or RMC) is responsible for repairs and maintenance of the building. The landlord will generally not be able to recover costs for improvement works unless the lease specifically contains a clause that permits the landlord to carry out improvement works at a service charge cost to the leaseholders. It can sometimes be difficult to draw a distinction between repairs and improvement works, but as a general rule, an improvement will usually consist of a feature of the building that did not exist at the time the original lease was created.
Statutory Information on service charge and ground rent demands?
Since 1st October 2007, a summary of rights and obligations must accompany your demand for service charges. This requirement applies also to any reminder letters that you send to the leaseholders chasing non/late payment of service charges. In addition, every service charge or ground rent demand should contain the name and address of the landlord together with the landlord’s address for serving notices, failing which the demand is not payable, until the name and address is duly provided. A defaulting leaseholder could rely on this omission to avoid paying their service charge or ground rent demand. You can obtain more information about this from sections 47/48 Landlord and Tenant Act 1987.
Rights to Information under Sections 21/22 Landlord and Tenant Act 1985:
A leaseholder can make a written request to the landlord for a summary of costs incurred for the last financial year. This information should be supplied within one month of the date of the request or within 6 months of the end of the financial year, whichever is the later. In addition to this right, the leaseholder will have a further right to request reasonable facilities to view accounts, invoices and any other relevant documents that support the summary of costs. Where there are more than 4 flats in the dwelling, the summary of costs must be certified by an accountant. It will be a summary offence if without reasonable excuse; the landlord fails to supply the said information. Such offence could be prosecuted by the Tenancy Relations Officer of the local council or privately by the leaseholder in a magistrate’s court. If successfully prosecuted, you could be liable to make payment of a fine up to £2,500.
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The rule in Section 20B Landlord and Tenant Act 1985:
This is an important rule that you must be aware of because of the potential consequence to the management company (RMC). If you incur relevant costs, that is service charge costs, and more than 18 months have passed before you inform the leaseholders that you have incurred this cost to which they will be expected to make a service charge contribution at some time in the future, that contribution may not be payable. It will be important therefore to serve a notice on the leaseholders setting out the amount and notifying them that the management company has incurred this cost, and will be seeking reimbursement at some future time.
Request for Insurance Information -Section 30A and Schedule to the Landlord and Tenant Act:
This provision entitles the leaseholder to make a written request to the landlord for a summary of the buildings insurance policy. The summary will set out the name of the Insured, the amount insured and the risks insured. Such summary must be supplied within 21 days of the request, failing which it will consist a summary offence that can be prosecuted at the magistrate’s court. In addition to this right to a summary, the leaseholder can make a further written request to you for reasonable facilities to inspect and take a copy of the policy and any relevant documents like the insurance schedule.
Section 20 Consultation:
This is an important statutory provision that you must be aware of. This means that you should engage the leaseholders in a three stage consultation exercise where you intend to carry out major works to the building that will cost any one leaseholder more than £250 or you intend to enter into a Qualifying Long Term Agreement, being an agreement for more than 12 months at a cost of more than £100 per any leaseholder. The consequence of failing to consult is that a leaseholder could challenge the demand for service charge in respect of those works, and if successful, their contribution could be limited to £250 or £100 as the case may be for failure to consult.
Alero Orimoloye
The Leasehold Advisory Service LEASE - a government-funded, free legal advice service for leaseholders, landlords and others in respect of the law affecting residential leasehold and commonhold.
Tel: 0845 345 1993
www.lease-advice.org
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